The increasing complexity and opaque supply chain system has allowed for a thriving counterfeit market. A report issued by the International Chamber of Commerce predicts the counterfeiting market could reach $2.3trn by 2022 from the previous $1.7trn in 2015, with goods ranging from automotive supplies to chemicals and pesticides, consumer electronics, electrical components, food, drink and agricultural products.
In addition to a thriving counterfeit market, there has been a continuous lack of transparency across multi-billion dollar corporations to disclose risks associated with their products, as well as accurately source their supplies. For example, in June 2017, Takata, once a titan in the auto parts industry, declared bankruptcy and is estimated to owe $33bn to their suppliers, a scandal that could be traced back to around 2000 when Takata’s executives were aware of dangerous defects with its airbags’ years and falsified test reports to automakers. The recalls have affected nineteen automakers to date and it is estimated that it will take until 2023 before all vehicles are removed from the roads.
How Blockchain Technology Can Address Such Issues
VeChain, a blockchain-enabled product management platform, aims to address the current issue, helping businesses by ensuring a full 360-degree view of their supply chain, with all segments securely recorded and stored in a distributed ledger. The project has been around since 2015 and is being implemented across various industries including luxury goods, automotive, agriculture, logistics, food/drugs and governments. In short, the blockchain technology will establish a trust-free sharing business collaboration model to address the fragmented flow of information across the whole supply chain where various parties will ensure the security of the data is efficient.
The company uses an asset digitisation method to address such problems, allowing manufacturers to assign products with unique identities. Currently, VeChain has initiated three solutions including RFID tag, QR codes and NFC chips to track goods through the supply chain at each stage.
In short, the IDs are generated randomly using a sha256 function and hashed before being written into an RFID tag, QR code or NFC chip to be used in a client’s product. The company then allocates private keys to all participants within the supply chain.
To ensure that VeChain’s supported products are not counterfeited, one solution that the company has highlighted is to integrate the tags as part of the product. Therefore, damaging the tag would damage the product itself.
VeChain, who announced their partnership with DNV GL back in January, has recently revealed its first third-party initiated decentralised application, My Story, a Blockchain-enabled QR-code solution for the food and beverage industry. The Italian wine sector, including four wine producers, Michele Chiarlo, Ricci Curbastro, Ruffino and Torrevento, will be implementing the hardware tag by end of the year.
Luca Crisciotti, CEO of DNV GL says:
“My Story illuminates products and their supply chain for the benefit of consumers, who will have instant and in-depth access to key products characteristics such as quality, authenticity, origin, ingredients, water and energy consumption and more, all verified by DNV GL along the entire transformation process,”
VeChain Thor and Token Utilisation
While the current VeChain’s Blockchain is running on a forked and improved Ethereum codebase, the company is scheduled to launch their own Blockchain platform, undergoing a transformation into VeChain Thor (VET) that will move the company beyond supply chain management solutions into decentralised applications.
The new model has two merits. First, it will allow participants with 10,000 VET to run “master nodes”, giving them voting rights to the network. This is to enforce the protocol rules and keep all other participants honest. Second, the new model helps prevent transaction fees being directly correlated to the volatility in the price of tokens.
The VeChain Tokens (VET) are designed for companies as a smart payment currency to run their activities across the Blockchain network. During the transition period, the companies with more VET will be given higher priorities and more rights. Holding VET will passively generate THOR Power based on how much is held at any given time.
THOR represents the “gas” cost of using the VeChain Blockchain. The idea is to streamline cash flows for businesses and using VeChain’s Blockchain network will allow them to predict more accurately the cost of executing the smart contracts.
As VeChain has received a lot of media attention from the much-anticipated rebranding into VeChain Thor, the public is now waiting for the arrival of VeChain’s own main net, expected to launch in Q2 2018.
While VeChain has created a strong reputation from their numerous large partnerships with multi-billion corporations across all their covered industries, an important outlook going forward will be the continuous development of third-party decentralised applications. With their recent announcement confirming the partnership with BMW at the rebranding event, there is optimism in developing digitalised solutions to prevent future similar scandals to Takata.
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